Law Firm Insurance

Law Firm Insurance

While it may seem that the legal industry is indestructible, the truth is the industry is just like any other industry out there:

1.The Entertainment Industry

2.The Hospitality Industry

3.The Travel Industry

4.The Retail Industry

5.The Sales Industry

Bottom line: businesses in any industry absolutely need a form of insurance known as “professional liability.”

So Why Is “Professional Liability” Law Firm Insurance Necessary?

As skilled with the law as attorneys are for any law firm, the fact is they put themselves out there under major risk of civil lawsuit. Why?

Any service any business provides can face a civil lawsuit simply for not achieving desirable results or not achieving any result at all. Examples would be:

1.Selling Defective Products

2.Chauffeurs Committing Errors Behind the Wheel

3.Selling “Rotten” Food in a Restaurant

4.Movers Damaging Furniture

5.Doctors Making Mistakes in the Operating/Emergency Room

And then of course law firm insurance is essential to protect lawyers from cases that are decided unfavorably.

An Example of Why Law Firms Require Professional Liability

It’s actually been recently published that many firms are finding themselves on the wrong end of lawsuits. Why’s that?

On the case of malpractice lawsuits – for starters, clients can actually proceed with litigation against lawyers on either end. In other words, an MD can sue an attorney for harassment charges or emotional distress and mental anguish; likewise, a client can actually sue a law firm for mediocre services in proceeding with the malpractice lawsuit against a hospital.

Some of the things that have been happening include:

1.Law Firms Obtaining Law Firm Insurance Against Liability Claims

2.Clients Using Litigation to Negotiate Their Bills

3.Larger Firms Are Primary Targets Now Due to the Quantity of Insurance Carried

4.Former Employees/Partners These Days File These Lawsuits Against Firms

In a nutshell, law firms – especially the big-time players in the legal industry – have the means toward having a lot of money. So because of their field, many throw in lawsuits to get some sort of relief for whatever issue they may have –

Prompting law firms to gather as much law firm insurance as possible.

Explaining Law Firm Insurance: the Basics

Again, though, it’s often called professional liability. It’s also known as “professional indemnity” and at times the field of “errors & omissions.”

Typically this insurance is the kind of law firm insurance necessary to protect from all sorts of claims, such as:

1.Negligence

2.Misrepresentation

3.Violation of Good Faith and Fair Dealing

4.Inaccurate Advice

Generally speaking, law firm insurance falls under the “errors & omissions” category. Consultants and brokers also utilize this form of insurance. Other typical professional liability insurance policies can go under:

1.Accounting

2.Financial Companies

3.Construction

4.Maintenance

5.Transportation

6.Non-Profits

What Can Law Firm Insurance Cover?

First off, policies law firms take generally revolve around a claims-made basis – that simply means the policies will only cover claims that have been issued during the policy period.

This means that no law firm can utilize law firm insurance for claims made before the insurance was obtained. There’s generally no retroactive feature.

Typically, though, it’s not much of an issue, because no law firm would be lackadaisical in obtaining suitable law firm insurance just in case a claim is made in the future.

Professional liability insurance also doesn’t cover these specifics:

1.Limited Liability

2.Product Liability

3.Strict Liability

4.Vicarious Liability

5.Criminal Prosecution

Specifics of a Law Firm Insurance Policy

Wording is important. If there’s one thing any law firm – or any business owner, for that matter – should know about insurance policies, it’s that anything and everything should be written down on them to cover all the bases. If something’s missed, there’s no way to cover for it.

Common wordings can be:

1.Breach of Duty

2.Negligent Act

3.Error or Omission

A “breach of duty” in a law firm insurance policy is the basic terminology for covering against damages by the actual policy holder reporting the incident during the actual policy period. In other words, if a law firm holds itself accountable and reports any incident that would constitute negligence or erroneous activity, the law firm will not incur any statutory damages toward any civil lawsuit.

“Negligent acts,” of course, protect a law firm from claims resulting in a loss or circumstance due to missteps or oversights. In other words, if a lawyer failed to follow through with a direct examination, for example, and it cost the client the decision in court, a provision in the law firm insurance policy can protect the law firm from a future lawsuit filed by that client.

“Error or Omission” follows the same ideal, only protecting a law firm from any mistakes or misrepresentation of information – such as not fully informing a client of important decisions or specific key points in a case. Any client not fully informed of everything can actually file a lawsuit against any business.

In addition, a law firm can add a provision in a law firm insurance policy to cover what is called a statute of limitations, a stipulation stating that no claim can be made after a certain period of time during the period of the policy.

It’s Serious Business

For obvious reasons. Lawyers must be as effective as possible in their profession, because potential clients – and even former partners or employees in the firm – can sue for just about any reason.

It would stand to reason that the larger the company, the more likely the lawsuit. This is the main reason for suitable professional liability insurance for a law firm. The basics are necessary, covering all the bases:

1.Correct Wording

2.Accountability

3.All-Inclusiveness

4.Statute of Limitations

Paying the premiums for such a policy is worth a million dollars to a firm that would potentially face several lawsuits from several former clients (or employees). It’s important to know that even law firms need their legal protection.